The Ungovernable Society. Grégoire Chamayou
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for profits will spur the owner of industrial property to its effective use. It consequently challenges the fundamental economic principle of individual initiative in industrial enterprise. It raises for reexamination the question of the motive force […], and the ends for which the modern corporation can be or will be run’ (Berle and Means, The Modern Corporation and Private Property, p. 9).This does not merely undermine the hypothesis of the maximization of profit as a realistic description of entrepreneurial behaviour, but denies the institutional basis of the traditional profit motive (see Edward S. Mason, ‘The Apologetics of “Managerialism”‘, The Journal of Business, vol. 31, no. 1, January 1958, pp. 1–11 [p. 6]).
28 28. Richard Sedric Fox Eells, The Government of Corporations (Glencoe, IL: Free Press of Glencoe, 1962), p. 16.
6 ETHICAL MANAGERIALISM
There is no theory of the firm that satisfactorily justifies the large modern corporation. Efforts are made to elevate the idea of social responsibility (or, synonymously, the corporate conscience or good citizenship) to the status of a theory of the firm.
Wilbur Hugh Ferry1
[…] they have not, like the medieval corporations, as yet created a corporate conscience in lieu of the individual responsibility which, by dint of their very organization, they have contrived to get rid of.
Karl Marx2
In the modern period, noted Charles Fourier, a new type of discourse had taken the place of morality and its sermons. The moralists did not realize soon enough that ‘Political Economy [has] invaded the whole field of charlatanerie […], the moralists have fallen into nothingness, and have been pitilessly enrolled into the class of novelists. Their sect died with the eighteenth century; it died politically’.3 As for the economists, they had quickly become too strong to need allies, and had ‘scorned any path of rapprochement and maintained all the more that what was needed was great, no, very great wealth, with a huge trade and huge commerce’.4
But, he added, ‘the fall of the moralists harbingered the fall of their rivals. We can apply to those literary sects the words of Danton who, on the scaffold, already tied down with a strap, said to the executioner: Keep the other for Robespierre; he will soon be following me. So moralists can tell their hangman, and the public opinion that is sacrificing them: Keep the other belt for the economists; they will soon be following us’.5
What Fourier did not foresee, however, was that this predicted death would be followed by a singular rebirth. In the twentieth century, an unprecedented crisis undermined Adam Smith’s doctrines. People were already working behind the scenes to update the theory, but the initial response was to exhume ancient idols. The economy succumbed in turn, and its fallen rival, morality, made a new entrance in the new guise of an ethical managerialism that presented itself in the 1950s as the grand solution to the problem of the legitimacy of managerial power.
In the vision of the world put forward by the old industrialist paternalism, the manager-owner reigned over his business as his own ‘thing’. He was still viewed in the nineteenth century as a descendant of line of the old ‘master, the dominus, that is to say, the owner of the workers he employs’.6 He could always retort to those who questioned his power, ‘Here, I am the one who commands because I am at home, and this belongs to me’. This was the basis for an authority to which the managers of large modern companies can no longer lay claim.
The separation of ownership and control has not only shattered the old managerial justification for authority,7 but has also weakened the demands of the shareholders (who are now merely passive owners) that the ‘corporation should be operated in their sole interest’.8 The appearance of huge, ‘quasi-public’ companies, whose decisions have an impact on everyone’s lives, have ‘placed the community in a position to demand that the modern corporation serve not only the owners […] but all society’.9
So what interests must be taken into account in the management of businesses? In 1932, Edwin Merrick Dodd asked ‘for whom corporate managers are trustees’?10 An American CEO replied: ‘the social responsibility of management has broadened […] Management no longer represents, as it once did, merely the single interest of ownership; increasingly it functions on the basis of a trusteeship which endeavors to maintain, between four basic interlocking groups, a proper balance of equity’.11 Thus was formulated a new ‘philosophy of management’, ‘the “trustee” philosophy or fiduciary administration’, which presented managers as the trustees of several social groups.12
What happened in the wake of the book by Berle and Means, over several decades, was that an ideology of the social responsibilities of the businessman was attached to the problem of the separation of ownership from control. In what is considered to be the founding text of this paradigm, Social Responsibilities of the Businessman, published in 1953, Howard R. Bowen rejected the view that ‘no rules for the individual would be required except those of following one’s self-interest ardently and competing vigorously’.13 True, businessmen must make a profit, but they are also obliged to ‘to conduct their enterprises with concern for all the interests affected’ by the business’s activities.14
Where legitimate private authority was thought to be an attribute of property rights – it’s because the business is mine that I am authorized to manage it – ethical managerialism now justifies it in a non-patrimonial way: the manager now draws his legitimacy from non-proprietary interests. It is precisely to the extent that I do not manage the business for myself that I am justified in doing so. As Hal Draper notes: ‘In this approach, then, the new irresponsibility of the uncontrolled Institutional Leaders is no longer a thing to view with alarm but rather a necessary precondition to freeing them from the petty, distorting influences of short-range, profit-maximizing considerations’.15 The empowerment of managerial power, the very same empowerment that led to anxieties about a drift into autocracy, now miraculously transfigures itself into moral autonomy. The turnaround is complete, since it could now be claimed, pace Burnham, that this new managerialism was not a new form of dictatorship and that ‘the managerial ethic is inherently benevolent’, precisely since ‘the manager is in no sense an owner’.16
If the art of leadership is that of ‘balancing interests’, so the position of the ‘almost anonymous managers’ will be a ‘point of convergence’ between multiple claims that they will decide fairly, in accordance with the ancient virtue of the juste milieu (the middle ground).17 If business thinks of itself as ‘a system of private government’,18 the manager will change his spots and be transformed into a sort of ‘statesman’19 – ‘L’État c’est moi, mais moi, je suis une corporation (‘The state is me, but I am a corporation’), as one American commentator wrote at the time, resorting to French.20
Until the early 1970s, the thesis of Berle and Means on the separation of ownership and control was the object, as the sociologist Maurice Zeitlin pointed out, of an ‘astonishing consensus’ in the American social sciences.21 This thesis was at the heart of a managerialist vision of capitalism based on a series of established truths. Here they are:
1) The main site of economic power has moved: ‘the decisive power in modern industrial society’, concluded Galbraith, ‘is exercised not by capital but by the organization, not by the capitalist, but by the industrial bureaucrat’.22
2) The principle of profit maximization was rejected: ‘Never has the imputation of a profit motive been further from the real motives of men than it is for modern bureaucratic managers’, claimed Dahrendorf.23
3) The capitalist class, divided between shareholding and managerial functions, has lost all consistency, giving way to an ‘amorphous power structure’.24 Berle went so far as to refer to a ‘capitalism without capitalists’.25
4) Private property of the means of production, which was already being seen as liquid,